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Soybeans:

January soybeans lost 16.00 cents on heavier than normal volume of 300,117 contracts. Volume was the strongest since December 10 when January soybeans lost 17.25 cents on volume of 329,583 contracts and total open interest declined by 2,891 contracts. On December 16, total open interest increased by 2,325 contracts, which relative to volume is approximately 60% below average. However, the January contract accounted for loss of 20,839 of open interest, which means there were sufficient increases of open interest in the forward months to offset the decline in January.

The price and open interest action on December 16 was decidedly bearish because it shows that new short sellers were in control and driving prices lower.

As this report is being compiled on December 17, January soybeans are trading 4.00 cents higher and have made a daily low of 10.15, which is the lowest print since 10.03 1/2 made on December 5. In order for January soybeans to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for December 17 of 10.19 7/8. Stand aside until a sell signal has been generated, which Is likely to occur during the next few of days.

Soybean meal:

January soybean meal lost $8.80 on volume of 97,047 contracts. Total open interest increased by 3,094 contracts, which relative to volume is approximately 30% above average meaning that new short sellers were aggressively entering the market in large numbers and driving prices lower. Making the total open interest increase more impressive was the fact that the January contract lost 9,460 of open interest indicating there were sufficient open interest increases in the forward months to offset the decline in January. The action on December 16 was far more bearish for soybean meal than soybeans.

The total open interest increase in soybean meal was approximately 30% above average, whereas the total open interest increase in soybeans was nearly 60% below average. In yesterday’s report, we pointed out that soybean meal has been under performing soybeans for the past month.January soybean meal will generate a short term sell signal on December 17 if the high for the day is below OIA’s key pivot point for December 17 of $361.30. Thus far in trading as this report as being compiled January soybean meal is trading $3.50 higher and has made a daily high of 360.90, which is below the pivot point.Usually, after a sell signal is generated, the market has a tendency to have a counter trend rally, and this is the opportunity to initiate bearish positions. The counter trend rally can last from 1-3 days.

Corn:

March corn lost 2.50 cents on volume of 285,583 contracts. Total open interest increased by 7,996 contracts, which relative to volume is average. The March contract lost 918 of open interest, May 2015-3,193. As this report is being compiled on December 17, March corn is trading 2.00 cents higher and has made a daily high of 4.10, which is below yesterday’s high of 4.11/2. Both Kansas City and Chicago wheat are rallying sharply on December 17, but corn is barely responding. We saw this yesterday when Chicago wheat rallied to a high of 6.39, and corn was unable to penetrate the high for the move of 4.12 1/2 made on December 15. March corn remains on a short and intermediate term buy signal. We have no recommendation.

Chicago wheat:

March Chicago wheat advanced 4.25 cents on heavy volume of 133,594 contracts. Volume increased substantially from December 15 when March Chicago wheat advanced 12.50 cents on volume of 89,405 contracts and total open interest increased by 1,452 contracts. Additionally, volume was the highest since November 14 when Chicago wheat advanced 6.75 cents on volume of 140,269 contracts and total open interest increased by 3,058 contracts. On December 16, total open interest declined by 1,954 contracts, which relative to volume is approximately 40% below average. The March contract accounted for loss of 2,892 of open interest, May 2015 -22.

As this report is being compiled on December 17, March Chicago wheat is trading 18.50 cents higher while the Kansas City contract is trading +22.25 and are making new highs for the move. The advance in wheat is being driven by the turmoil in Russia and the fear of export restrictions. As we have pointed out before, the fundamentals for US wheat are negative and world supplies are abundant.However, we strongly advise against shorting wheat and clients should not attempt to pick a top in the market.

Although Chicago wheat has advanced strongly since December 11, open interest action has been unimpressive. For example from December 11 through December 16, March Chicago wheat has advanced 41.50 cents. However total open interest during this four-day period has declined by 2,138 contracts. In short, the dominant action for the past 4 days has been one of liquidation, likely by speculators who have been short the wheat market for quite some time.

As we reported in the December 14 Weekend Wrap, managed money only became net long Chicago wheat with the December 9 COT report. Despite this, there remains a large number of speculative shorts who will continue to get blown out of the market.Once a sufficient number of shorts have been eliminated, Chicago wheat needs fresh new longs to continue the rally. At that point, the market will struggle to move higher in our view, which will sow the seeds for a new bear market. March Chicago wheat remains on a short and intermediate term buy signal. Stand aside.

Live cattle:

February live cattle lost the daily limit of 3.00 cents on total volume of 40,151 contracts. Total open interest increased by 1,607 contracts, which relative to volume is approximately 55% above average meaning new short sellers were entering the market aggressively and driving prices down to the limit. The total open interest increase was  actually more bearish because the December contract lost 1,370 of open interest and February 2015 – 529. As this report is being compiled on December 17, February live cattle is trading 2.375 cents lower after being down the 3.00 cent limit for most of the day.

On December 3, OIA announced that February live cattle generated a short-term sell signal and an intermediate term sell signal on December 15. The market is overdue for a bounce, but there are large numbers of speculative longs who are being forced to liquidate as prices move lower and margin calls are issued. This group will stymie any significant rally because large numbers of speculators will be looking to trim losses as prices advance, which will keep rallies in check.

WTI crude oil:

January WTI crude oil gained 2 cents on huge volume of 1,176,808 contracts.Volume traded on December 16 was the highest of 2014, and it occurred on a day when January WTI made a new contract low of 53.60 and closed nearly unchanged on the day. On December 16, total open interest declined by 23,055 contracts, which relative to volume is approximately 20% below average. The January contract accounted for loss of 68,725 of open interest. As this report is being compiled on December 17, January WTI is having one of the very few rally days we have seen over the past several weeks and is currently trading $1.90 higher after making a daily high of 58.98, which is the highest print since 59.77 made on December 12. Stand aside.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.8 million barrels from the previous week. At 379.9 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 5.3 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.2 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories fell 0.8 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 1.2 million barrels last week.

Natural gas:

January natural gas lost 10.0 cents on volume of 259,816 contracts. Total open interest increased only 502 contracts, which is dramatically below average. The January contract accounted for loss of 12,739 of open interest, which makes the very minor increase of open interest more impressive (bearish). As this report is being compiled on December 17, natural gas is rallying along with the petroleum complex, up 7.5 cents on the day. On December 1, OIA announced that January natural gas generated a short and intermediate term sell signal. Stand aside.

Gold:

February gold lost $13.40 on heavy volume of 251,474 contracts. Volume was the strongest since December 9 when February gold advanced $37.10 on volume of 254,496 contracts and total open interest increased by 6,693 contracts. On December 16, total open interest declined only 1,511 contracts, which relative to volume is approximately 70% below average. Apparently the large number of new longs in gold are refusing to liquidate, which could provide a significant amount of selling pressure if prices break lower. For February gold to generate a short-term sell signal and reverse the short-term buy signal on December 11 , the high for the day must be below OIA’s key pivot point for December 17 of 1180.30. As this report is being compiled on December 17, before the release of the Federal Reserve minutes, February gold is trading approximately unchanged. Stand aside.

Silver:

March silver lost 81.1 cents on very heavy volume of 81,502 contracts. Volume on December 16 was heavier than December 9 when silver advanced 85.8 cents on volume of 70,417 contracts and total open interest increased by 1,658 contracts. With March silver on a short-term buy signal, volume should be expanding on rallies and contract when prices decline. On December 9 and 16 we saw the opposite. On December 16, total open interest increased by 235 contracts, and though this is 85% below average an open interest increase on a price decline is bearish. As this report is being compiled on December 17, silver is trading 17.8 cents higher and has made a daily high of 15.985, which is above OIA’s key pivot for December 17 of 15.974.This means that March silver will not generate a short-term sell signal on December 17. Stand aside.

Cocoa:

March cocoa advanced $41.00 on volume of 16,681 contracts. Total open interest declined by 183 contracts, which relative to volume is approximately 45% below average, however considering the magnitude of the advance, the total open interest decline is negative. The May 2015 contract lost 481 of open interest, July 2015 -477, but the March 2015 contract gained 792 of open interest. As this report is being compiled on December 17, March cocoa has closed at 2915, up $1.00.March cocoa remains on a short-term buy signal, but in intermediate term sell signal. We think the path of least resistance is higher.

Coffee:

March coffee lost 95 points on volume of 13,691 contracts.Total open interest increased by 304 contracts, which relative to volume is approximately 15% below average. The May 2015 contract lost 180 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on December 17, March coffee has closed at 1.7185, down 5.85 cents. Thus far, the decline has been orderly and the dominant action has been one of liquidation rather than new short sellers entering the market. However, this may be about to change and may signify that lower prices are ahead in the short-term before the market turns around. The fundamentals for coffee are very bullish, and often before a market begins a major move higher, longs are blown out by the downside action.